The other day I was going through the comments that had been submitted recently in response to various blog posts. This is actually one of the more enjoyable parts of maintaining this web site, because I often get to find out how people are finding affordable care options as self-pay patients, or respond to questions or comments they have. I also get to wade through a lot of spam (although if I ever need a mail-order-bride from Russia, I now know there are sites I can turn to).

Reviewing the comments that had been left on one of my recent posts about cash-only and cash-friendly doctors, I found one by Dr. Efrain Arroyave, a retired doctor in the Miami region. Dr. Arroyave in recent years has been very active in the self-pay healthcare world, helping to launch companies catering to self-pay patients like econoLABS, NextImage Direct, and opening in September, SelfPayMD, a chain of primary care practices in the Miami area that are cash-only.

I thought Dr. Arroyave’s comments were pretty interesting, and I thought they deserved a wider audience than whomever might stumble across them on that blog post. So, with his permission, I’ve re-posted his comments here as a stand-alone guest piece. It reads a little different than most pieces, because it was written in part to explain the ‘business case’ for SelfPayMd (or at least that’s how it reads to me), but it’s still a very informative commentary and I hope you all get as much out of his comments as I did!

Even before ObamaCare, as a direct result of diminishing reimbursements and rising overhead costs, many Primary Care Physicians (PCPs) retired early, abandoned their practice or joined primary care groups to share overhead. Some refused to accept government or private insurance, opting to change their insurance-based practice to a “direct-pay” business model (self-pay). Currently in the USA, direct-pay accounts for 4%-6% of primary care medical practices – and growing. Even in England, where they have had socialized medicine for several decades, it is growing at 5% per year.

Stressed Primary Care Physicians

Today PCPs typically get paid about 20% – 25% of their billed amount, while shouldering labor-intensive collections effort. Thus, by not accepting any form of health insurance, we eliminate unnecessary employees, which allows for a lower overhead, which in turn allows us [SelfPayMD] to charge only $75 per visit.

More Patients and Less Primary Care Physicians = Long wait-times for appointments

ObamaCare will add 32 million patients to the insurance rolls; and, by the government’s own admission, they expect a shortage of 52,000 PCPs by 2020. Even with the full implementation, they also predict that over 30 million people will remain uninsured (you read correctly)! This will lead to congestion: in Massachusetts, with its mini-ObamaCare, the wait time to see a PCP is about two months; and, if patient care in Veterans Hospitals is any indication of things to come, long wait-times to be seen by a physician will be the norm.

Gaming the System: Small Penalties vs High Premiums vs Lifestyle

Small penalties for not having health insurance will likely lead to people who will game our healthcare system, resulting in higher premiums for those who comply, e.g., a thirty year-old earning $30,000 per year will pay about $300 per month. At that age there is very little thought given to illness or accidents. So, knowing that – by law – hospitals must treat uninsured patients, it might be a good gamble to lease a new BMW instead of paying for mandatory health insurance.

A new congressional report estimates more than 25 million Americans without health insurance will not be made to pay a penalty in 2016 due to an exploding number of ObamaCare exemptions – serving as another loophole for not buying health insurance.

Growing Premiums with Deductibles of $5,000 to $9,000

Many insured patients with mandatory high deductibles may shop around for low prices, even if they have to pay out-of-pocket. Then, there are the middle-middle and some upper-middle class who cannot afford their monthly insurance premium, which can only continue to rise. The poor will receive free healthcare via Medicaid, and the lower-middle class will receive subsidies.

Fraud —> Higher Premiums —> More Uninsured Middle-Middle Class

By the Government’s own admission: although the IRS will play a key role in ObamaCare, there is no system in place to monitor income requirements for subsidies, they will rely on the honor system. This will lead to fraud and higher premiums from insurance companies. The poor will not be affected but many in the middle-middle class may not be able to afford higher premiums; and, they will also seek out affordable “Self-Pay” PCP and diagnostics proposed herein.

Questionable Legality of Federal Subsidies

Two US judicial panels recently issued conflicting rulings over the federal government’s ability to offer subsidies to 5 of the 8 million consumers who signed up for insurance this year. This will most likely require Supreme Court intervention; and, depending on their decision, many who now qualify for government subsidies will be unable to afford health insurance.

Small Employers Wanting to Give Workers Some Coverage

Small employers with less than 50 employees will be looking to offer their employees some form of primary care health coverage. A recent book by Ezekiel Emanuel, one of the architects of ObamaCare, admitted that only 20% of employer-based health insurance will exist within 10 years. This is not surprising considering that employers with over 50 employees will only be fined $2,000 per year per employee for whom they do not provide health insurance. Thus, anywhere from 50 million to 80 million employees will be shunted to the health insurance exchanges.

Flying Under the Radar

In as much as young, uninsured workers will still require an occasional visit to a PCPs; and, since our Direct-Pay model is not required to report to private or government insurance companies, the government will not be able to identify them – until they are forced to enter the governments’ healthcare data base, e.g., hospitalization or a hospital emergency room. These mostly young individuals are an obvious pool of potential patients to Direct-Pay models.

Privacy of Medical Records

Being that SelfPayMD will not accept any form of private or government insurance, we are not required to upload our patients’ medical records to the government’s data-hub. Thus, our patients’ medical records and personal information are safe from government scrutiny and possible hackers.

Of the total number of visits to primary care physicians, how many of these would be initiated by the patient in a society without prescription laws? We should realize that physicians have a financial interest in having patients make more frequent office visits. Also insurance companies favor the same thing because added visits allow the insurance company to justify higher premiums, a portion of which like any business is profit. One major difference here is that most businesses do not have the power to get their own customers to come more frequently and buy things. Then the consumer has a choice of businesses to go to. Both “brick and mortar” businesses and “on line” businesses such as Amazon.com.

Walmart is introducing clinics in its stores staffed by nurse practitioners who do have like doctors the legal right to write prescriptions. However the clinic visit will cost less than a visit to the doctor’s office, even if the patient is paying the full cost. For those with the more common chronic diseases, this will no doubt save them money over visiting doctor’s offices.

US health care costs are by far the world’s highest. Unfortunately there is no way to reduce these costs without reducing the incomes of those involved in health care. So whose income gets cut? Insurance companies? Drug manufacturers? Hospitals? Doctors? The people who do the insurance billing in doctor’s offices, hospitals? Obviously to reduce US health care costs, someone’s income has to be “cut”…

And right there is the problem. Getting the government “out” of health care would no doubt reduce costs as without government, the professional monopolies would no longer exist. No prescription laws, patients start making decisions regarding their health care. Going by history, the neighborhood druggist would have a larger role to play. Then there is computer technology, becoming more advanced year after year.

Because of this technology, the productivity of labor is the highest it has ever been. But there is a “dark side” to this too. The employment of lesser skilled workers is falling. To hold down anything but an unskilled labor job in our economy now requires greater intellectual ability. You have to have a higher IQ to graduate from college than you did to graduate from high school. Willingness to work is no longer enough. This also means that fewer people will be able to afford health insurance as it now exists. It is possible to take tax money from the better off and use it to help the lower income people buy increasingly expensive health insurance, but this path is effectively long term a “dead end”. Especially as it does nothing to reduce the cost of health care. The insurance company can “squeeze” the doctor only so much. The same is true of hospitals, medical device makers, the drug manufacturers.

Eventually we will be forced to make a decision as a country as to the sort of health care we are willing to pay for and how it is delivered. The choice most people appear to support is to copy the sort of national health insurance used in Canada, Great Britain, France, Germany, Italy, etc. In effect it is supported by taxes and individual income has much less effect upon the quality of care you receive for the majority of people.
The other choice is to remove from health care all those things that prevent people from taking a much greater role in their own health care. In one word, “deregulation”. This is what I’ve been advocating on my blog here on WordPress.

@Jerome, it’s not necessarily a zero-sum game. ObamaCare has practitioners working in the paperwork & regulation salt mine for fifteen minutes (or whatever it is) per patient visit. If we simply unburdened them they could see more patients (or spend more quality time with each), make the same money (or more), even while charging less.

If we pay cash for our ordinary needs, we avoid that wasteful burden. If we let people shop–including prices–and let them choose what they want, hundreds of millions of us will be enlisted in searching out the easiest, best, most efficient ways to care for American health needs, and enforcing it with billions of daily decisions about what works best for each of us.

I agree 100%. Far too much wasteful overhead involved. Health Savings Accounts (that can be invested until needed) effectively reduce the cost of care by 25% (lack of “overhead” plus return on investment of 5%). The health savings account uses “pre-tax” money and is limited to only “medical”, although it would be possible to allow the money accumulated over what is spent to be built up over the years into a retirement account similar to an IRA. Additionally remove the regulations that prevent less than MD level practitioners to provide health care services. There is no good reason why we can’t have “clinics” in stores for the more simple medical issues except that the MD’s would oppose it on the basis that it would cut into their incomes. Effectively the professional organizations are no different than labor unions where only certain union members can do certain tasks. The entire idea of “organization”, labor or professional is to raise the incomes of its members (along with other benefits). The corporations have “broken” the labor unions through outsourcing the work outside the US. Unfortunately it is much more difficult to do the same with professional services, although for advice it would seem that the Internet communication programs would serve for many such issues.

The major problem is the “stakeholders” in the existing system. They are well aware of the fact that without the government backing them up, the free market would quickly force them to accept lower incomes as more of their patients sought help elsewhere. Also it is not just the medical profession. The other professions are doing the same thing. Effectively organizing against their “customers” to force the customer to pay more. Think of what our lives would be like if Wal Mart was the only legal retailer. There’d no longer be “low prices”, but more the opposite. It is “competition” that controls prices. Without “competition”, the organized professions behave no differently than did organized labor It is only the fact that we dropped our tariffs which made it possible for “competition” to take place in the production of consumer goods. At one time we had something called “fair trade laws” which prohibited retail businesses to sell consumer goods below the “manufacturer’s suggested retail price”. This was a great deal for the “Main Street” businesses as it kept out “competition” from the likes of “superstores” like Wal Mart, Target, K-Mart, from underpricing them. The standard in retail back then was “wholesale + 40%”. Finally these laws were repealed and stores were allowed to compete on price. Which effectively “doomed” a lot of “Main Street”, but which gave the consumer the ability to shop and find the lowest price for things!

This what we need in health care. It will be a vicious fight because the established interests are well aware that current prices for services are well above free market levels. It is “government” that protects them from a degree of competition that would reduce the cost of health care here in the US to levels similar to those now found in Europe. Here in the US the government acts on the behalf of business and the organized professions. Mainly because of the type of system we have and the ease of “buying” legislation that favors you. We have the right to vote, but it is pretty much meaningless as voting means little if you can’t control the process that creates the candidates in the first place. This goes back all the way to when the country was founded, and those who founded this country had a great fear of the general public. One they felt fully justified when they saw what happened in France in the same year the Constitution was adopted.
This is really “where” the problem is today, but few will admit that fact…